Effective from January 2025, Luxembourg will implement several notable changes to its VAT registration thresholds and related compliance requirements. Here is a comprehensive overview of these changes and their implications for businesses.
Increase in Annual VAT Registration Threshold
As of January 1, 2025, Luxembourg will increase the annual VAT registration threshold from €35,000 to €50,000. This change, proposed under Bill 8406 and currently under consideration by the Chamber of Deputies, aims to reduce the administrative burden on small businesses and align with broader EU VAT reforms. This threshold increase is part of Luxembourg’s continuous efforts to simplify VAT compliance and support small businesses.
Introduction of the SME Special Scheme
Luxembourg will also introduce a new SME Special Scheme VAT threshold of €100,000 for resident businesses. This scheme allows businesses with annual sales up to €100,000 to sell VAT-exempt across the other 26 EU member states. However, participation in this scheme requires businesses to file a new quarterly report of sales and obtain a new EX number for invoicing. The new threshold is designed to facilitate cross-border trade and reduce compliance costs for small and medium enterprises.
Eligibility Criteria and Limitations
The eligibility for the new thresholds and schemes is subject to specific criteria:
- Resident Businesses: Only businesses established in Luxembourg can benefit from the new €100,000 threshold.
- Sales Calculation: Eligibility is based on the previous year’s sales, excluding VAT.
- Exclusions: The new threshold does not apply to farmers, those renting out immovable property, or those involved in intra-community supplies of new means of transport.
If a business exceeds the €50,000 threshold during the year, it must register for VAT from the month following the month in which the threshold was exceeded.
Intra-Community Supplies and Voluntary Registration
Luxembourg maintains a separate VAT registration threshold of €10,000 annually for intra-community supplies. Businesses below this threshold can opt for voluntary VAT registration. This option provides flexibility for small businesses to manage their VAT obligations effectively.
Historical Context and Previous Threshold Adjustments
Luxembourg last increased its VAT registration threshold in January 2021, raising it from €30,000 to €35,000. The upcoming changes are part of a broader effort by the European Union to streamline VAT compliance across member states and encourage intra-EU trade.
Preparing for the Changes
Businesses operating in Luxembourg or engaging in cross-border trade within the EU should take the following steps to prepare for these changes:
- Review Sales Figures: Ensure accurate sales records to determine if your business will need to register under the new thresholds.
- Understand Reporting Requirements: Familiarize yourself with the quarterly reporting obligations and the process for obtaining the EX number if participating in the €100,000 SME Special Scheme.
- Consult with Tax Advisors: Seek professional advice to ensure compliance and optimize your VAT strategy under the new regulations.
These changes reflect Luxembourg’s ongoing commitment to reducing administrative burdens for businesses and aligning with EU-wide VAT reforms aimed at simplifying compliance and fostering economic growth within the single market.
